Introduction letter for newly regulated entities: Banks and federal credit unions

Enterprise Building
427 Laurier Ave. W., 6^th Floor
Ottawa ON K1R 1B9
E-mail: compliance@fcac.gc.ca

Subject: Requirements for regulated entities

Dear Madam/Sir:

I am writing to provide you with a review of some of your obligations as a federally regulated financial entity (FRFE) and request certain information about your institution.

This letter outlines the following:

A. Information your organization must provide to FCAC
B. Details of your reporting requirements
C. FCAC’s Supervision Framework

The Financial Consumer Agency of Canada (FCAC) is the federal regulatory body that oversees compliance by regulated entities with their statutory obligations related to the consumer provisions that are contained in the legislation.

FCAC also monitors compliance with the voluntary codes of conduct and public commitments that your institution has put in place, which are designed to protect the interests of your customers.

A. Information to be provided to FCAC

As a federally regulated entity, you must provide certain information to FCAC, including:

A1. Detailed complaint handling procedures

Since your institution’s governing legislation contains a requirement to file a copy of your detailed complaint-handling procedures with FCAC, I would ask you to provide us with a copy of these procedures.

In addition, please include an organization chart that shows the various line positions included in your complaint-handling process, so that we can more easily identify the levels of responsibility involved at each stage.

A2. Summary of complaint-handling procedures

Please provide FCAC with a one-paragraph summary of your complaint-handling procedures outlining the specific steps consumers can take to have their complaints resolved.

We will post this summary on our website. Our call centre will also use this summary to assist consumers by informing them of the complaint-handling procedures they should follow for your institution, and by directing them to the right point of contact in your institution or, where applicable, to your third-party dispute resolution body or mechanism.

Regulated entities must inform FCAC promptly of any changes to their complaint-handling procedures or to their contact people.

A3. Organizational contacts/Compliance liaisons

Please provide FCAC with the contact information of both the primary and alternate compliance liaison staff in your organization, in particular:

• names
• titles
• addresses
• telephone numbers
• email addresses

The Compliance liaison is a designated senior official serving as the regulated entity’s main point of contact responsible for communicating and liaising with FCAC on the regulated entity’s market conduct obligations.

FRFEs must inform FCAC promptly of any changes to their complaint-handling procedures or to their contact people

A4. Third-party dispute resolution body

All banks must be a member of an external complaints body.

There are two approved external complaints bodies, the Ombudsman for Banking Services and Investments and ADR Chambers Banking Ombuds Office. Please provide us with the appropriate contact information for that organization.

A5. Product lines

Please provide a list of the retail products that you offer to consumers (e.g., accounts, personal loans, credit cards, prepaid cards, RRSPs, GICs, TFSAs, etc.).

If you do not offer retail products or services, please provide a brief description of the services or product that you offer.

A6. Voluntary Codes of Conduct and Public Commitments

Regulated entities must make publicly available (e.g. brochure, website) all codes or public commitments they have adopted.

Please provide a list of any voluntary codes of conduct that you have adopted, and made publicly available, as well as any public commitments your financial institution has made to protect the interests of your customers.

This material must include:

• a brief summary of the contents of each code or commitment
• information on how to obtain a copy of the complete documents
• information about how consumers can contact FCAC

B. Reporting Requirements

FCAC’s Supervision Framework and its related mandatory reporting guide describe the information that regulated entities are required to report to FCAC on a regular basis. Please familiarize yourselves with the requirements and reporting timeframes detailed in the mandatory guide.

For additional information on the different types of reports and deadlines, please visit the section of Canada.ca entitled Important forms and guides for regulated entities.

C. FCAC’s Supervision Framework

FCAC’s Supervision Framework describes the principles and processes the Agency uses to supervise the market conduct of regulated entities.

In keeping with the risk-based approach of FCAC’s Supervision Framework, all regulated entities will be classified as either Tier 1 or Tier 2 depending on the level of market conduct risk that is present or inherent in their business activities. These classifications guide the nature and intensity of the Agency’s supervision of regulated entities.

FCAC will advise you of your organization’s classification once we have received and reviewed the information being requested herein. A regulated entity may be reclassified, at FCAC’s sole discretion, should there be a change to its business model, products or services that affects its market conduct risk.

Tier 1

Tier 1 regulated entities include a range of business models, such as:

• regulated entities offering retail products and services to consumers
• PCNOs whose participants offer payment services to merchants; and
• ECBs offering dispute resolution services to member banks.

FCAC supervisors work more closely with Tier 1 regulated entities given that their business activities inherently include market conduct risk and require compliance with federal market conduct obligation overseen by FCAC.

Tier 2

Tier 2 entities include a range of business models, such as banks and trust companies that do not offer retail products and services, or insurance companies that restrict their business to the sale of insurance.

In keeping with FCAC’s risk-based approach, Tier 2 regulated entities are subject to less intensive supervision as their business activities result in minimal risk of breaching a federal market conduct obligation that is overseen by FCAC. However, they must still complete an annual questionnaire regarding their business model, products and services. The questionnaire includes an attestation requesting confirmation that all complaint related requirements have been met for the year.

Please provide the information requested in an electronic format that is compatible with Microsoft Word and email it to: compliance@fcac.gc.ca.

For more information about FCAC, including the Commissioner’s decisions on the Agency’s compliance cases, I invite you to visit FCAC’s website. You can also find detailed information about the consumer provisions for all of the regulated entities on our website.

Thank you for your co-operation.